McCarthy, Scalise rise — How Scalise did it — Pressure on FINRA to issue higher fines

By Jon Prior and Kate Davidson

06/20/14 08:01 AM EDT

MCCARTHY, SCALISE RISE — House Republicans elected California Rep. Kevin McCarthy as majority leader and Louisiana Rep. Steve Scalise as whip on Thursday. POLITICO’s John Bresnahan, Jake Sherman and Anna Palmer: “Their election — which was held by secret ballot — doesn’t represent seismic change atop the House Republican majority, but it does give the Deep South a spot at the leadership table after a two-year absence. … The Thursday afternoon election was held in the cavernous — and well-guarded — Ways and Means Committee room in the Longworth House Office building. The room erupted applause several times. After he had won, McCarthy paid tribute to the defeated Cantor, saying the Virginia Republican has ‘done more than anyone in the room to create our majority.’” http://politi.co/TakbvL

HOW SCALISE DID IT — Sherman, Bresnahan and Palmer: “Steve Scalise is known for giving his friends a little bit extra. In Louisiana , it’s called lagniappe. … Scalise, 48, knew how to build up chits. And over the span of nine-day leadership election, the five-year congressional veteran cashed them in — in break-neck fashion — lifting him from the rank and file to the House Republican leadership.” http://politi.co/1pkAxfL

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PRESSURE ON FINRA TO ISSUE HIGHER FINES — The Financial Industry Regulatory Authority didn’t discipline any Wall Street executives in the five years leading up to 2013 — and the pressure is mounting on the Wall Street watchdog to toughen up. WSJ’s Jean Eaglesham: “Finra, an industry-funded regulator, levied big penalties during that period at a rate that badly trailed the Securities and Exchange Commission, according to an analysis by The Wall Street Journal of the two regulators’ enforcement actions. Finra imposed fines of $1 million or more 55 times through 2013, or less than once a month on average, compared with 259 times for the SEC over the same period, the analysis showed.

“The SEC’s fines against financial firms in that period reached as high as $300 million, dwarfing Finra’s highest of $12 million, the analysis shows.” http://on.wsj.com/1nRRlLv

NY FED TAKES ON BIGGER ROLE IN REPO MARKET — FT’S Tracy Alloway and Michael Mackenzie: “The Federal Reserve Bank of New York has emerged as the single largest player in an important segment of the short-term lending market that was at the epicentre of the financial crisis. The Fed’s decision to quadruple its trading with government money market funds in the repurchase or “repo market” is a sign that the central bank is now engaging more directly with the shadow banking system at the expense of large Wall Street banks.

“Historically, the repo market was where big banks pawned out their securities such as Treasury bonds to lenders including money market funds, insurers and mutual funds, in exchange for short-term financing. Now the Fed is stepping in to trade as well as it prepares to end its current near-zero interest rate policy.” http://on.ft.com/UjSf9y

FUND WILLING TO SETTLE WITH ARGENTINA — At least one hedge fund is said to be willing to take an offer from Argentina as the country seeks to work out a deal with bondholders and avoid default. Per CNBC: “Elliot Management is willing to take an Argentine settlement of a combination of bonds and cash … Under U.S. court directives, Argentina owes the hedge fund about $1.5 billion on June 30.” http://cnb.cx/1nm7oOG

GERMANY LOOKS INTO DEUTSCHE BANK’S COMMODITIES — WSJ’s Laura Clarke: “The regulator, BaFin, sent a letter to the bank outlining its findings in April, this person said. It’s not known whether the regulator found deficiencies in the bank’s processes or instructed the bank to make any changes. … Deutsche Bank AG said in December that it would exit most of its commodities trading business. Changes to bank regulations have made it tougher for banks to generate profits from commodities trading.” http://on.wsj.com/1nRFtcA

HAPPY FRIDAY — This is the last Morning Money from your guest columnists. Ben is working off his jet lag and will be back with you Monday morning. Thanks for getting us through the week with your tips, feedback and moral support!

** A message from Grant Thornton LLP- It’s time for Congress to make the research credit permanent, make a portion of the credit refundable and increase the alternative simplified credit. By combining both the Senate Finance Committee and House proposals, we could help our country’s R&D programs be more competitive with the rest of the world. Learn more: http://gt-us.co/RnDcredit1 **

HAPPENING TODAY — The House is scheduled to vote on the CFTC reauthorization bill … The House Financial Services Committee is scheduled to vote on TRIA at 9 a.m. … SEC Chair Mary Jo White speaks at the Economic Club of New York … The U.S. Conference of Mayors holds its annual conference in Dallas. http://bloom.bg/1bidM2T

TRANSITIONS: BEAN TO JPMORGAN — Former Congresswoman Melissa Bean, the Blue Dog Democrat — and defender of national bank preemption — who represented Illinois’ 8 th District from 2005 to 2011, is leaving her post as CEO of the Executives Club of Chicago to take over as chairman of JPMorgan Chase’s Midwest business. Bean replaces former United Airlines CEO Glenn Tilton. http://on.mktw.net/1kTl16D

MARKETS UNFAZED BY GLOBAL, POLITICAL CRISES — Wonkblog’s Rebecca Robbins: “An oil refinery on fire in Iraq, continued unrest in Ukraine, the unexpected downfall of the second-ranking House Republican in Washington — none of it has perturbed the markets.

“In the midst of tumult abroad and political uncertainty at home, U.S. financial markets have responded calmly to crisis after crisis in recent weeks. As of Wednesday, the past 43 consecutive sessions of the Standard & Poor’s 500 index have fluctuated upward or downward by less than 1 percent. To put that streak in context, the S&P 500 hasn’t seen this little movement since 1995, when the index didn’t change by a full percentage point for 95 days.” http://wapo.st/UjGIXZ

SANTANDER BOND MISTAKE RAISES WORRIES: Businessweek’s Sarah Mulholland: “A recent error by Banco Santander in distributing $71 million to investors in a bond deal linked to subprime auto loans points to the potential for more such lapses in the booming market, according to Citigroup Inc. … Issuance of bonds linked to subprime auto loans is surging as investors chase riskier assets with central banks around the world suppressing interest rates to spur economic growth.” http://buswk.co/1m18dQm

NEW REGS HURTING MARKIT? — Are new regulations put in place since the 2008 financial crisis hurting the breakout of a company that aimed to shine a light on the shadow banking system? WSJ’s Paul J. Davies: “Markit, which is selling no new shares, was a smart idea in a different time. The company was set up to provide much-needed transparency to a world of over-the-counter derivatives and securities trading. But since the financial crisis, much of that world is being forced out of the shadows into the light of centralized clearing, trade reporting and even futures exchanges.” http://on.wsj.com/TbDk0t

ROUND ONE TO ACKMAN IN ALLERGAN CASE: Per WSJ’s Liz Hoffman and David Benoit: “A Delaware judge has fast-tracked William Ackman's lawsuit against Allergan handing a small win to the activist investor and Valeant Pharmaceuticals International his partner in an escalating hostile bid for the Botox maker, according to people familiar with the matter.” http://on.wsj.com/1idwm6X

COULD U-HAULS HELP BOOST THE ECONOMY? — National Journal’s Nancy Cook: “The solution to two of the country’s most pressing economic woes may come down to a very simple idea: renting a bunch of moving vans. Those vans could help relocate some of the more than 3 million Americans who have been out of work for more than six months to states with relatively low unemployment rates, such as Texas or North Dakota. Or the vans could transport entire families to places where low-income kids historically have a better chance of moving up the income ladder as they age.” http://bit.ly/1nRSPpe

HOW CREDIT SUISSE GOT OFF EASY—Newsweek’s Lynnley Browning: “Last fall, James Cole, the No. 2 man at the Justice Department, sent an intriguing email about the criminal investigation of Credit Suisse’s offshore tax-evasion schemes for wealthy American clients. He asked Kathy Keneally, the agency’s top official directing the protracted investigation of Switzerland’s second biggest bank, ‘Can you give me an update on where we are with them?’ In that September 4 email, whose contents were obtained by Newsweek, Cole added this eyebrow-raising detail: ‘I got a call from Broderick Johnson who says the CEO wants to get this resolved.’ Broderick Johnson would be a lawyer and former lobbyist close to President Barack Obama. ” http://bit.ly/1nnWsl2

ALSO FOR YOUR RADAR —

GROSS TURNS TO BRAINWASHING: Pimco’s Bill Gross keynoted Morningstar’s annual conference in Chicago yesterday with some shades and tried to don a new image as well. From WSJ’s Kirsten Grind: Gross “urged reporters in the audience — calling out each media outlet by name — to play a game with him based on the movie ‘The Manchurian Candidate,’ a Cold War political drama about a former military officer who is brainwashed by Communists. ‘Repeat after me,’ Mr. Gross said. ‘Bill Gross is the kindest, bravest, warmest most wonderful human being you’ve met in your life.’” http://on.wsj.com/1idxl7a

BEST PLACES FOR WORKING PARENTS — WaPo’s Amy Joyce has an interesting piece on which areas of the country have the best policies to help working parents, an important factor in an economy where households are seeing their wages stagnate. Washington, D.C. fares pretty well: “It earned a B+ because it provides paid sick days, paid medical leave for pregnancy and paid family leave.” http://wapo.st/1iMASnD

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** A message from Grant Thornton LLP — Let’s boost US growth, create jobs and incentivize increased R&D activities for all businesses — small or large, start-up or established. Our lawmakers have taken significant steps forward with proposed legislation that would make the research credit permanent, easier to use, and refundable to those businesses that need credit now. Let’s come together and make the credit permanent. Learn more: http://gt-us.co/RnDcredit1

** A message from the Independent Community Bankers of America: The first U.S. community banks were formed in the wake of the American Revolution to stabilize the nation’s postwar finances. By providing loans to entrepreneurs and developers, these community banks were soon stimulating economic growth and financing the rise of the world’s greatest democracy. Their legacy of relationship banking and local economic and job growth continues to this day, with more than 2,500 of the nation’s community banks in business for more than 100 years and the oldest dating to the presidency of John Adams. Today serving communities in every congressional district, community bankers nationwide urge Congress to advance tailored banking regulations that will allow these job creators to continue supporting local economic growth for decades to come. www.icba.org/aboutus **

Authors:

About The Author

Kate Davidson is a banking reporter for POLITICO Pro. Prior to joining POLITICO in November 2012, Kate spent three years at American Banker, where she covered the Treasury Department, Office of the Comptroller of the Currency and the new Consumer Financial Protection Bureau. She also worked for a year at Congressional Quarterly covering what would eventually become the 2010 Dodd-Frank financial oversight law.

Before moving to Washington in 2008, Davidson worked for the Concord Monitor in Concord, N.H., where she wrote about NASCAR, advancements in maple sugaring technology, the first-in-the-nation presidential primary and everything in between. She got her first job in journalism covering education for her hometown paper, the New Hampshire Union Leader.

Davidson graduated from Boston University in 2004 with a bachelor of science degree in journalism. She lives in Northwest D.C. with her husband, son and aging basset hound.